Biochar Production, Economics and Policy Implications for the Forest Sector Harvesting woody biomass in Idaho to fuel Tucker RNG biomass gasification system Chips and biochar produced from biomass cogeneration of heat and power. developed in partnership with USFS. harvested from White River National Forest. Nate Anderson, Research Forester USDA Forest Service, Rocky Mountain Research Station FCWG Knowledge Transfer: Biochar January 12, 2021 Photos: Anderson What’s ahead? • Background – Biochar systems – Bioproducts supply chains – Focus on forest biomass • Economics – Investment risk – De-risking biochar ventures • Policy connections • Take home messages • Discussion A commercial biochar operation co-located with a sawmill in Colorado. 2021 FCWG Knowledge Transfer: Biochar Photos: Anderson Acknowledgements • USDA National Institute of Food and Agriculture (NIFA) – RMRS-BRDI (2011-10006-30357) – BANR (2013-68005-21298) – UM-BRDI (2016-10008-25636) – MASBio (2020-68012-31881) • USDA Forest Service • University partners, faculty, staff, postdocs and graduate students • Industry and NGO partners 2021 FCWG Knowledge Transfer: Biochar Photos: Anderson; J.Field/BANR (center) Biochar Systems • Soil benefits • Waste management • Renewable energy • Carbon sequestration 2021 FCWG Knowledge Transfer: Biochar Figure: RMRS 2015 Biochar Systems Restoration Forests providing sustainable biomass for biochar Site rehab production and biochar providing rehabilitation Resilience and restoration benefits on National Forests. 2021 FCWG Knowledge Transfer: Biochar Photos: Anderson. Figure: RMRS 2015 The Bioproducts Supply Chain • Bioproducts supply chain – Production – Feedstock logistics – Conversion – Distribution logistics – End use • Flows of: – Material & carbon – Capital ($) – Information Anderson et al. 2017. Chapter 2 in Biochar: A Regional Supply Chain Approach in View of Climate 2021 FCWG Knowledge Transfer: Biochar Change Mitigation, Cambridge University Press. (Photos: Anderson) Competitive Advantages of Forest Biomass • Large volumes as waste or byproduct • Options for material quality and cost • Low, zero or negative stumpage cost Logging residues Aspen logs Mill residues • Co-location with existing industry • Generally good carbon balance and sustainability, depending on land use • Tied to non-market benefits like: Fuel Treatment Beetle kill salvage Mill residues – Forest restoration and forest health – Reduced wildfire and smoke risk – Diverse ecosystem services including carbon sequestration, recreation, water, biodiversity and others Fuel Treatment Hardwood cull Hogged slash 2021 FCWG Knowledge Transfer: Biochar Photos: Anderson and Loeffler (bottom left) Competitive Disadvantages of Forest Biomass • Difficult terrain with dispersed access • Long transportation distances • Costly logistics • Heterogeneous feedstock characteristics St. Regis, MT to Lewiston, ID • Spotty, episodic salvage availability 213 mi (343 km) • Tied to timber and land management goals • Seasonality and storage challenges Images: Google Maps 2021 FCWG Knowledge Transfer: Biochar Expand Markets for Forest Biomass with New Enterprises Biomass Power Sawmill w/Cogen Biochar only Biofuel with biochar Photo: CPES Photo: Biochar Photo: Pacific Photo: Dodson Photo: Heat & Power Cogen Pellet Mill Co-located biochar Post & Pole Photo: CPR Photo: CPR News Institutional Heat Pellet Mill w/biochar Biopower w/biochar Commercial firewood Photo: Campbell Photo: Photo: SCN F 2021 FCWG Knowledge Transfer: Biochar Photos: Anderson except where noted. Drivers and Barriers to Success Critical Factor Considerations Integration Integration within and across sectors (e.g., forestry, agriculture, energy) Horizontal integration with other forest industry and manufacturing Vertical integration along the supply chain Scale Economies of scale in production; benefits of clustering Appropriate scale for feedstock supply and markets Competition Barriers to entry; Substitutability, price competitiveness, return on investment; Pressure to innovate, lower costs, increase productivity, improve quality Public policy Policies that favor or disfavor bioenergy and bioproducts Regulations, R&D funding, subsidies, taxes, information, carbon price Trade organizations, lobbying Local policy and support Local project support, public acceptance Knowledge and awareness about bioenergy and bioproducts 2021 FCWG Knowledge Transfer: Biochar Adapted from Roos, A., et al. 1999. Critical factors to bioenergy implementation. Biomass and Bioenergy 17: 113-126. De-risking Investment • Increase financial returns on investment • Reduce risk – Uncertainty – Stochastic outcomes – Impact Shifting the reward-risk profile of project investment. Waissbein, O., et al. 2013. Derisking Renewable Energy Investment. New York: 2021 FCWG Knowledge Transfer: Biochar UNDP and Glemarec, Y. 2011. Catalysing Climate Finance. New York: UNDP. Technoeconomic Analysis • Combine: – Engineering specs – Benefit-cost analysis • Compare: – Project options – Technologies – Business conditions – Assumptions – Other variables NPV distributions over a 20-year project period based on simulations for four project scenarios Campbell, R.; Anderson, N.; Daugaard, D.; Naughton, H. 2018. Technoeconomic and Policy Drivers of Project Performance for 2021 FCWG Knowledge Transfer: Biochar Bioenergy Alternatives Using Biomass from Beetle-Killed Trees. Energies 11: 293-313. Biochar Investment Risk Likely Profitability Waste feedstock (i.e., “tipping fee”) Proven mature technology (“nth plant”) Multi-product supply chain – Co-products, heat and power – Value added products (e.g., sorbents, etc.) Monetized non-market benefits – Carbon credits, tax incentives, etc. Price covers production cost and profit Offtake agreements or supply contracts From top left: dry microchips, pulp chips, raw biochar, biochar pellets, activated carbon from biochar, and wood pellets. 2021 FCWG Knowledge Transfer: Biochar Photo: Anderson Biochar Investment Risk Potential Profitability “Free” or low-cost feedstock New but tested technology (alpha unit) Primary products with process heat or power Non-market benefits as a marketing asset – Carbon sequestration, renewables, etc. Price uncertain, but based on evidence Spot-market transactions with repeat customers Biochar packaged & ready for shipping. 2021 FCWG Knowledge Transfer: Biochar Biochar Investment Risk Unlikely Profitability X Costly feedstock X Unproven technology (prototype or pilot) X Single low-value product X Uncertain non-market benefits X Unknown current and future prices X Fuzzy competitive markets X High risk investment Emissions problems with a mobile pyrolysis unit processing wood waste. 2021 FCWG Knowledge Transfer: Biochar Other Factors Photo: Biochar Photo: Pacific • Scale (feedstock, production, markets) • High or low capital expenditure (CAPEX) • High or low operating expenses (OPEX) • Mobile, modular or centralized • Simple or complex conversion technology • Low price or high price for outputs • Benefits that accrue to the customer 2021 FCWG Knowledge Transfer: Biochar Photos: Pacific Biochar; Anderson; Anderson Policy Connections Transfer investment risks to public actors to incentivize public benefits: • Direct incentives: premiums, subsidies, tax credits, carbon offsets, etc. • Grants, loan guarantees, public-private co- investment, partnerships • Feed-in tariffs, supply and offtake agreements • Payments for ecosystem services (PES), Shifting the reward-risk profile of project investment. political risk insurance (PRI), etc. Waissbein, O., et al. 2013. Derisking Renewable Energy Investment. New York: UNDP and Glemarec, Y. 2011. Catalysing Climate Finance. New York: UNDP. • Research, development and Extension Campbell, R.; Anderson, N.; Daugaard, D.; Naughton, H. 2018. Financial viability of biofuel and biochar production 2021 FCWG Knowledge Transfer: Biochar from forest biomass in the face of market price volatility and uncertainty. Applied Energy 230, pp.330-343. Take Home Messages • There are opportunities for biochar production and use in the forest sector • There are risks associated with investment • We can de-risk bioproducts supply chains • Research and decision tools can help The Tucker RNG System Biochar water quench. Biochar from southern yellow pine. 2021 FCWG Knowledge Transfer: Biochar Photos: Anderson For More Information Anderson, N.; Bergman, R.; Page-Dumroese, D. 2017. A supply chain approach to biochar systems. Chapter 2 in: Biochar: A Regional Supply Chain Approach in View of Climate Change Mitigation. Cambridge, UK: Cambridge University Press. p. 25-45. Campbell, R.; Anderson, N. 2019. Comprehensive economic evaluation of woody biomass energy from silvicultural fuel treatments. Journal of Environmental Management 250: 109422, 12 pp. Campbell, R.; Anderson, N.; Daugaard, D.; Naughton, H. 2018. Technoeconomic and policy drivers of project performance for bioenergy alternatives using biomass from beetle-killed trees. Energies 11(2): 293, 20 pp. Campbell, R.; Anderson, N.; Daugaard, D.; Naughton, H. 2018. Financial viability of biofuel and biochar production from forest biomass in the face of market price volatility and uncertainty. Applied Energy 230, pp. 330-343. Kim, D.; Anderson, N.; Chung, W. 2015. Financial performance of a mobile pyrolysis system used to produce biochar from sawmill residues. Forest Products Journal 65(5/6): 189-197. 2021 FCWG Knowledge Transfer: Biochar FCWG Knowledge Transfer: Biochar January 12, 2021 Contact Information THANKS! Nate Anderson, Research Forester Rocky Mountain Research Station 800 Beckwith Ave., Missoula, MT 59801 [email protected] USDA is an equal opportunity provider, employer and lender. Photo: W. Chung.